kenya\s apex bank retains base lending rate at 850
Last Updated : GMT 16:19:48
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Kenya\'s apex bank retains base lending rate at 8.50%

Arab Today, arab today

Arab Today, arab today Kenya\'s apex bank retains base lending rate at 8.50%

Nairobi - XINHUA

Kenya's central bank (CBK) on Tuesday retained its benchmark lending rate at 8.50 percent citing confidence in the economy and fall in the overall inflation which declined in February. The Bank's top monetary policy organ, the Monetary Policy Committee (MPC) said the private sector expects inflation and the exchange rate to remain stable for the remainder of 2014. "Furthermore, the private sector firms sustained their optimism for a strong growth in 2014," CBK Governor Njuguna Ndung'u said in a statement issued in Nairobi after the MPC meeting. During the meeting, the Committee resolved that the monetary policy measures had continued to deliver the desired price stability, noting however that the overall inflation remained in the upper bound of the medium-term target of 5 percent. "The Committee therefore decided to retain the CBR at 8.50 percent to continue anchoring inflationary expectations. The CBK will continue to monitor the key macroeconomic aggregates and any emergent risks that may impact on price stability," Ndung'u said. The MPC met on Tuesday to review market developments and the outcomes of its previous monetary policy stance. The Committee noted that overall inflation continued to decline in February and remained within the target range, while exchange rate stability was maintained. The overall month-on-month inflation declined from 7.21 percent in January 2014 to 6.86 percent in February. Month-on-month non- food-non-fuel (NFNF) inflation remained relatively stable: it increased slightly from 4.83 percent to 4.93 percent during the period. This, MPC said, is an indication that the monetary policy stance has continued to support a stable inflation rate and that private sector credit growth during the period was non- inflationary. "In addition, both the 1-month and 3-month annualized Overall and NFNF inflation measures stabilized in February 2014, indicating an easing of underlying inflationary pressure," they said. The Central Bank Rate (CBR) continued to coordinate movements in the short-term interest rates while the liquidity management operations adopted by the CBK sustained the interbank market stability. According to MPC, the expected normalization of government deposits over the rest of the fiscal year would lead to more widespread use of the CBK liquidity management operations. The latest stress tests and data revealed that the banking sector remains solvent and resilient. The number of loan applications increased from 94,259 in December 2013 to 111,486 in January. These were distributed across the key sectors of the economy. The number of loan approvals increased from 85,889 to 102,287 during the same period. The annual growth in private sector credit stood at 20.47 percent in January 2014 compared with 20.08 percent in December 2013. The Committee said the government domestic borrowing program for the Fiscal Year 2013/14 as provided in the Medium-Term Budget Policy Statement published by the Government in February, remains consistent with the monetary policy objectives. The programmed domestic borrowing ensures that the private sector is not crowded- out as that would jeopardize the expected increase in private investment. The domestic borrowing program has enabled the bond market to remain vibrant while also facilitating the deepening of the capital market. According to MPC, the latest Sovereign rating by Fitch Rating agency undertaken in February placed Kenya at "B+ with a stable outlook" has boosted confidence in the East African nation's economy.

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